FORTUNE -- Michael Dreyfus, 49, is a leading real estate broker in the heart of Silicon Valley. During the winter he sensed the housing market was coming back, though he hadn't a clue what he'd be in for. In February prospective sellers came to him with a listing for a perfectly respectable property in Palo Alto: four bedrooms, three bathrooms, 7,500-square-foot lot, needs work. He recommended that the sellers ask $1.9 million. When the house went on the market in April, they had bumped the price to $2.3 million. Seven offers came in above that price; $2.7 million won the frantic bidding. Several buyers attempted to make offers even as the broker was supervising repairs to a kitchen flooded by a burst pipe. What's a little leak when the price tomorrow may hit $3 million? "We live in an alternative universe here," Dreyfus acknowledges.
Welcome to the Bizarro World of Silicon Valley Summer 2011, where financial fervor is fueling yet another real estate boom. Billions of dollars in fresh venture capital is being invested, and tech IPOs are hitting the stock market weekly. The rest of the country may be in the economic doldrums, but here the winds are fair and the sails of the newly rich captains are full. Entrepreneurs are pulling out fresh business plans; more angel investors are getting into the pre-IPO action; exuberance fills the Northern California air. Is the surge the beginning of a new, lasting wave of good times to wash over El Dorado, or is it the harbinger of the latest speculative cycle?
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